Beyond Bitcoin

Proving the value of distributed ledger technology.

Increasingly, distributed ledgers are being used to manage complex transactions that involve large numbers of people. Their underlying algorithmic block-chain technology makes it possible to carry out many transactions very quickly, dynamically, and in a way that allows the various different participants in a transaction to record that transaction simultaneously by using traceable “blocks”.

When we think about DLT, we often think about the cryptocurrencies that use it, like Bitcoin. But the underlying blockchain technology can be applied to a whole new range of areas: indeed, distributed ledgers consist of a suite of emerging technologies that are just as likely as virtual currency to transform many different industrial sectors over the next few years.

For instance, digital contracting is an important growth area. DLT enables the use of smart contracts, where all parties are able to see when any changes are made, and who has made them. There is huge potential here to disrupt the legal processes of most organisations by increasing the speed of doing business, while simultaneously reducing the transaction costs of writing and signing agreements.

Then there is the potential for creating digital signatures and authentication tools. One company that we have worked with at KTN is Everledger, which deploys block chain technology to record and track diamond sales. Every time a diamond is sold, a record is lodged on the Everledger system, and (as with all distributed ledger technology), once a transaction is recorded it cannot be erased. Everledger hopes that this will help to reduce diamond theft, as well as fraud, as diamonds have distributed ledger marks etched on to them, making them highly traceable.

In short, then, anywhere that there is there is a vital need for secure administration, distributed ledger technology has the potential to reduce bureaucracy, save time and money, and make transactions more secure and transparent. Government operations – such as tax collection, the delivery of income-related benefits, or the issuing of passports and other documentation – could be transformed, as could complex transactions such as those around property and land.

But is distributed ledger technology truly secure? In his 2016 report, Distributed Ledger Technology: beyond block chain, the Government Chief Scientist Sir Mark Walport comes to the conclusion that while the underlying technology is likely to be safe, unauthorised access to distributed ledger systems is still likely to be a potential growing target to cyber attackers.

For this reason, DLT is one of the ten areas of focus that we identify in the new report from KTN, Cybersecurity: challenges and opportunities for the UK. In the workshops that we held with industry experts, which fed into our report, distributed ledger clearly emerged as being worthy of greater attention. It is important that cybersecurity is kept high on the agenda in relation to distributed ledger technology: successfully commercialising distributed ledger services depends upon people having confidence in their security.

And the questions around distributed ledger are not confined just to security. As an emerging technology, there are also questions around performance and scalability: the dynamic performance of distributed ledger technology has been proven with Bitcoin, but there are still relatively few people who use it. Will this technology continue to perform when many more people have adopted it?

For these reasons, while distributed ledgers are probably secure per se, new applications need to be stress-tested, at scale, in an experimental environment. A large-scale demonstrator, led by the needs of industry, would stress-test the technology’s security and capability, under real-world conditions.

This is an important area for UK business – both in terms of the potential economic benefit for UK companies using distributed ledger technology, and also in UK software businesses helping to develop it for new markets.

A large-scale demonstrator would prove the security, performance and scalability of distributed ledger technology, giving confidence to the people and organisations who might benefit from using it, and enabling the great potential of distributed ledger to be realised. That way, we may one day soon find that our paycheque, our travel data, our health records and even our democratic voting system will be protected and assured by distributed ledgers.

This article is one of a series from KTN following the publication of our new report “Cybersecurity: challenges and opportunities for the UK”. This identifies ten themes for cybersecurity, each of which represents an opportunity for UK industry to seek or develop tools and techniques to counter the risk of cyber attack. The launch article and links to the main report and annex can be found here.